DoT rejects Trai's move to cut cell firms' revenue share to govt

Manoj Gairola, TNNSep 22, 2004, 10.14pm IST

NEW DELHI: In a set back to mobile operators, DoT has decided to reject Trai's recommendation of excluding earnings from sale of handsets from the adjusted gross revenue of telecom companies. The annual revenue share of the government, paid out by the telecom operators, is based on the AGRs.

Trai's suggestion to change the definition of AGR — by excluding some components — would have reduced the annual revenue share payable to the government. Telecom operators have to pay 6-10% of AGR to the government as licence fee, depending on the category of circles. They have to pay an additional 5% of AGR towards the universal services obligation (USO) fund.

CDMA operators like Reliance and Tata Teleservices sell handsets directly to subscribers. Operators, who are lobbying to remove handset sales from AGR, would be able to bundle their services with handsets. This is a world-wide practice and all operators want to offer it in India.

If the average price of a CDMA handset is Rs 4,000 and Reliance Infocomm added 50 lakh subscribers in one year, then the total fee it would have to pay is Rs 260 crore. Here we have assumed a revenue share of 8% and a USO fee of 5%. In India, revenues accruing from handset sales is added to the annual income when the operator sells a handset with a connection. Therefore, bundling of handsets adds to the licence fee. If DoT exempts revenue from sale of handsets from the ambit of gross revenue, operators will be able to offer incentive schemes on handsets without any revenue implications.

Telecom operators have been demanding that non-telecom revenue should be kept out of the definition of AGR to calculate the revenue share. At present, the gross revenue on which the licence fee is calculated includes revenues from non-telecom activities. The Cellular Operators Association of India (COAI) has estimated that non-telecom revenues account for about 10% of the total revenues. For instance, if an operator takes a loan and puts it in fixed deposit in a bank, then the interest earned on the deposit is added to the total revenue.